1-1 By: Nixon S.J.R. No. 14
1-2 (In the Senate - Filed January 15, 1997; January 16, 1997,
1-3 read first time and referred to Committee on State Affairs;
1-4 March 19, 1997, reported adversely, with favorable Committee
1-5 Substitute; March 26, 1997, recommitted to Committee on State
1-6 Affairs; April 4, 1997, reported adversely, with favorable
1-7 Committee Substitute by the following vote: Yeas 13, Nays 0;
1-8 April 4, 1997, sent to printer.)
1-9 COMMITTEE SUBSTITUTE FOR S.J.R. No. 14 By: Nixon
1-10 SENATE JOINT RESOLUTION
1-11 proposing a constitutional amendment authorizing a voluntary,
1-12 consensual encumbrance on a business homestead for the purpose of
1-13 an equity loan.
1-14 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-15 SECTION 1. Section 50, Article XVI, Texas Constitution, is
1-16 amended to read as follows:
1-17 Sec. 50. (a) The homestead of a family, or of a single
1-18 adult person, shall be, and is hereby protected from forced sale,
1-19 for the payment of all debts except for:
1-20 (1) the purchase money thereof, or a part of such
1-21 purchase money;
1-22 (2)[,] the taxes due thereon;
1-23 (3)[,] an owelty of partition imposed against the
1-24 entirety of the property by a court order or by a written agreement
1-25 of the parties to the partition, including a debt of one spouse in
1-26 favor of the other spouse resulting from a division or an award of
1-27 a family homestead in a divorce proceeding;
1-28 (4)[,] the refinance of a lien against a homestead,
1-29 including a federal tax lien resulting from the tax debt of both
1-30 spouses, if the homestead is a family homestead, or from the tax
1-31 debt of the owner;
1-32 (5)[, or for] work and material used in constructing
1-33 improvements thereon, if [and in this last case only when] the work
1-34 and material are contracted for in writing, with the consent of
1-35 both spouses, in the case of a family homestead, given in the same
1-36 manner as is required in making a sale and conveyance of the
1-37 homestead; or
1-38 (6) an equity loan on a business homestead as provided
1-39 by Section 50a of this article.
1-40 (b) The [nor may the] owner or claimant of the property
1-41 claimed as homestead, if married, may not sell or abandon the
1-42 homestead without the consent of the other spouse, given in such
1-43 manner as may be prescribed by law.
1-44 (c) No mortgage, trust deed, or other lien on the homestead
1-45 shall ever be valid, except for a debt described by this section,
1-46 whether such mortgage, or trust deed, or other lien, shall have
1-47 been created by the owner alone, or together with his or her
1-48 spouse, in case the owner is married. All pretended sales of the
1-49 homestead involving any condition of defeasance shall be void. A
1-50 purchaser or lender for value without actual knowledge may
1-51 conclusively rely on an affidavit that designates other property as
1-52 the homestead of the affiant and that states that the property to
1-53 be conveyed or encumbered is not the homestead of the affiant.
1-54 SECTION 2. Article XVI, Texas Constitution, is amended by
1-55 adding Section 50a to read as follows:
1-56 Sec. 50a. (a) An equity loan may not be secured by a
1-57 homestead other than a business homestead. A lender may not
1-58 require or accept a borrower's homestead, regardless of whether the
1-59 homestead was previously encumbered by an existing equity loan, as
1-60 collateral on a debt not described by Section 50(a) of this
1-61 article.
1-62 (b) A lender may not accelerate the remaining payments of an
1-63 equity loan or demand payment of the loan in full because of a
1-64 decrease in the market value of the business homestead securing the
2-1 equity loan, unless the decrease in the market value is caused by
2-2 substantial damage or destruction to the homestead, a condemnation
2-3 or other taking of the homestead, the discovery of an environmental
2-4 hazard on the homestead, or the use of the homestead in a manner
2-5 that constitutes waste on the homestead or a nuisance. This
2-6 section does not prohibit a lender, if permitted by the loan
2-7 documents, from refusing to make additional advances under an
2-8 equity loan if the value of the homestead decreases, regardless of
2-9 the cause of the decrease.
2-10 (c) A lender may not accelerate the remaining payments of an
2-11 equity loan or demand payment of the loan in full because of the
2-12 borrower's default under any other indebtedness not secured by a
2-13 prior valid encumbrance on the business homestead, regardless of
2-14 whether the indebtedness is owed to the lender. This section does
2-15 not prohibit a lender, if permitted by the loan documents, from
2-16 refusing to make additional advances under an equity loan if the
2-17 borrower has defaulted in the performance or payment of another
2-18 indebtedness owed to the lender or another creditor.
2-19 (d) The principal amount of an equity loan plus the
2-20 aggregate total of the outstanding balances of other indebtedness
2-21 secured by valid encumbrances of record against the business
2-22 homestead may not exceed 90 percent of the fair market value of the
2-23 homestead on the date the equity loan is made.
2-24 (e) In this section:
2-25 (1) "Business homestead" means a homestead used
2-26 exclusively for business purposes. This term does not include
2-27 homestead property designated for agricultural use as provided by
2-28 Subchapter C, Chapter 23, Tax Code.
2-29 (2) "Equity loan" means a loan made for a purpose
2-30 other than a purpose listed in Section 50(a)(1)-(5) of this
2-31 article.
2-32 SECTION 3. The following temporary provision is added to the
2-33 Texas Constitution:
2-34 TEMPORARY PROVISION. (a) This temporary provision applies
2-35 to the constitutional amendment proposed by the 75th Legislature,
2-36 Regular Session, 1997, authorizing a voluntary, consensual
2-37 encumbrance on a business homestead.
2-38 (b) The constitutional amendment takes effect May 1, 1998.
2-39 (c) This temporary provision takes effect on the adoption of
2-40 the amendment by the voters and expires May 2, 1998.
2-41 SECTION 4. This proposed constitutional amendment shall be
2-42 submitted to the voters at an election to be held November 4, 1997.
2-43 The ballot shall be printed to permit voting for or against the
2-44 proposition: "The constitutional amendment extending homeowners'
2-45 rights to borrow voluntarily against the equity in and establish a
2-46 valid lien on their business homesteads."
2-47 * * * * *